Govt considering stiff fiscal framework to contain public debt

NEW DELHI: India has indicated to the International Monetary Fund (IMF) that it is considering a stronger successor to the fiscal framework to contain public debt, an apparent indication of a stiffer law.

"They (IMF directors) were encouraged that the authorities are considering a strengthened successor fiscal framework to replace the existing one when it expires in 2009-10," the IMF said in its annual review of the economy following discussions with Indian authorities in February.

IMF also wants that the exercise to impose fiscal discipline should be supplemented by expenditure and taxation reforms.

"(IMF) directors called for the new framework to be backed by comprehensive expenditure reforms and measures to broaden the tax base," the IMF said in its notes based on the discussions with the government officials in the capital on February 6.

Faced with rising fiscal and revenue deficits, the government in 2003 enacted Fiscal Responsibility and Budget Management Act and committed itself to gradually bring down by 2008-09 the revenue deficit to zero and fiscal deficit to 3 per cent of the Gross Domestic Product.

These targets, however, have been missed in the past because of various reasons and still remain elusive as currently the priority of the government is to battle slowdown by raising expenditure and reducing taxes.